We recently wrote an article about whether or not you should outsource your payroll. We also wrote an article about some of the more popular services out there that may be good options for many of you. Since this is turning out to be such a hot topic, today we’ll discuss some payroll outsourcing services.
Compliance
Before we dig deeper into the compliance issues of payroll, we think it is important for you to note that it is your company’s responsibility to ensure that all compliance issues are handled correctly even if you are outsourcing your payroll to a third party. If they make a mistake, in many cases it will be your company that is held liable. Make sure you outsource payroll to a company with expertise and a solid track record.
One of the toughest things about payroll is that you have to make sure it is in compliance with the IRS rules. If it were as easy as multiplying, adding, and subtracting then there is now way that so many people would be looking for outsourced payroll services.
One of the main compliance issues is taxes. Without some sort of guidance, you can’t expect an entry-level payroll clerk to understand how much needs to be withheld for both federal and state taxes. They likely won’t know much about social security payments or withholdings for 401k plans either. Many outsourcing companies offer these compliance services.
Another common issue that is coming up more and more with this bad economy is how to deal with state unemployment insurance. Don’t expect a payroll clerk to have any idea what to do with this, unless they have been in the payroll business for a little while.
Payroll Processing
Another of the accounting services offered by payroll processing outsourcing companies is the actual delivery of the money to the employees. Of course your company is going to have to provide the money to the outsourcing company to make the payments, but they will calculate how much money is needed and send you a report. You simply have to read the report, make sure it looks right, and send the money. Making one payment is a lot easier than making hundreds of payments to individual employees.
A quick note on this payment function. A payroll outsourcing company is more likely to pay your employees through direct deposit then with actual checks. Most of the well-known firms will do actual checks if you twist their arms enough, but they definitely prefer direct deposit because it saves money and time. If your employees still want hard checks you’ll want to check with potential payroll outsourcing providers to see if it is an option.
Human Resource Services
Many payroll providers will also offer limited human resource services. One service you may be able to purchase from them is background checks for potential employees. Also, because these companies work with so many other companies they often have hiring and firing guides which can be useful if your business doesn’t have a current policy. In summary, they will help with a lot of the recruiting, hiring, and exiting processes. However, they aren’t going to provide day-to-day services like training and resolution dispute. Nor would you want them to handle these issues because they don’t understand your business or your people like you do.
In summary, payroll outsourcing companies offer three types of services: compliance, payment, and human resources. Most of the companies will allow you to pick and choose which services you prefer. If you don’t like your current payroll system you may want all three. However, if you’re just starting up and don’t understand the compliance issues you may just want compliance and payment.
